Has the AI Bubble Burst? Global Stocks and Bonds Shake Violently, Institutions Identify New Opportunities in Emerging Markets

AI technology stocks have recently corrected, and combined with market expectations that the U.S. Federal Reserve might maintain high interest rates or even hike further, global stock and bond markets are experiencing significant simultaneous turbulence.

However, Franklin Templeton Investment believes that long-term trends such as AI infrastructure development, digital transformation, and global supply chain reconfiguration have not changed. Amid the reshaping of the global economic landscape, emerging markets are gradually transforming from past followers into key forces driving global economic growth.

On the 6th, Franklin Templeton held a press conference, inviting Franklin Templeton fund managers Calvin Ho and Chetan Sehgal to Taiwan to share their outlook on emerging market investments amid changing global political and economic dynamics. They believe that both equity and bond markets could benefit from the trend of global capital reallocation.

Calvin Ho highlighted three main drivers behind the current appeal of emerging markets: global trade restructuring, deepening reforms in emerging nations, and global capital reallocation. As geopolitical tensions and tariff policies reshape global supply chain layouts, multinational corporations are gradually shifting toward regionalized production, and a new round of trade agreements is creating fresh growth opportunities for certain emerging economies.

He pointed out that many emerging countries have actively pursued institutional reforms in recent years, including enhancing central bank independence, establishing fiscal discipline, and adopting inflation targeting frameworks—improving economic resilience and policy credibility. Meanwhile, while strong U.S. economic growth attracted massive international capital over the past decade, as emerging market fundamentals improve, global asset allocation could gradually rebalance back.

At the press conference on the 6th, Franklin Templeton fund managers Calvin Ho and Chetan Sehgal visited Taiwan to discuss emerging market investment prospects under evolving global political and economic conditions. (Photo: Lin Yan-Cheng)

Regarding emerging market equities, Chetan Sehgal noted that after years of dominance by large-cap U.S. tech stocks in global markets, capital is now moving toward more diversified allocations, bringing emerging markets back into investor focus.

He emphasized that emerging markets are no longer merely following mature market business cycles but are playing an increasingly important role in technological innovation, industrial upgrading, economic expansion, and consumer growth.

Although short-term market fluctuations may still be influenced by interest rate policies and geopolitical factors, he stressed that the long-term growth trajectory of emerging markets remains unchanged. With ongoing institutional improvements, their overall investment value deserves reassessment.

In terms of sector positioning, Chetan Sehgal pointed out that continued global expansion of AI infrastructure benefits semiconductor supply chains in Taiwan and South Korea. However, investment opportunities in emerging markets extend beyond just the tech sector. India’s consumption upgrade, Brazil’s raw materials, Mexico’s nearshore manufacturing, South Africa’s critical minerals, and green energy and financial innovation in the Middle East all possess long-term growth potential—highlighting the importance of cross-country, cross-sector active stock selection.

On the bond front, Calvin Ho believes that after enduring shocks from the pandemic, global rate hikes, tariff policies, and geopolitical tensions, emerging markets have demonstrated stronger economic resilience than before. High real interest rates remain a major advantage in attracting international capital.

For example, as of end-June, Brazil’s real interest rate was close to 10%, while Colombia and Kazakhstan were around 6%. In contrast, the U.S. real interest rate was nearly zero. Additionally, emerging market currencies remain undervalued. Using the J.P. Morgan Emerging Market Currency Index as an example, as of end-June, it remained about 40–50% lower than levels seen during the 2002 and 2009 financial crises. If fundamentals continue to improve, there remains potential for currency appreciation.

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